A perquisite is a benefit or amenity that an employee receives in addition to their salary or wages. In the context of the Income Tax Act, a perquisite in respect of the use of movable assets is a benefit that an employee receives by using the employer’s movable assets, such as a car, laptop, or mobile phone.

The value of the perquisite is determined by the fair market value of the asset, or the amount that the employee would have to pay to rent or lease the asset. The perquisite is then taxable to the employee as part of their income.

There are a few exceptions to the taxation of perquisites in respect of the use of movable assets. For example, if the asset is used for the employer’s business purposes, the perquisite is not taxable. Additionally, if the asset is provided to the employee for a short period of time, such as a few days or weeks, the perquisite may not be taxable.

The following are some examples of perquisites in respect of the use of movable assets under Income Tax Act:

• A car provided by the employer for the employee’s personal use.
• A laptop computer provided by the employer for the employee’s work.
• A mobile phone provided by the employer for the employee’s work.
• A company credit card that can be used for personal expenses.
• A gym membership provided by the employer.
• A parking space provided by the employer.

EXAMPLE

• Motor car under Income Tax Act: If the employer provides a motor car to an employee for official and personal use, the taxable value of the perquisite is the actual amount paid or incurred by the employer for the motor car, including depreciation, insurance, and maintenance charges.
• Mobile phone under Income Tax Act: If the employer provides a mobile phone to an employee for official and personal use, the taxable value of the perquisite is the actual amount paid or incurred by the employer for the mobile phone, including airtime charges.
• Laptop computer under Income Tax Act: If the employer provides a laptop computer to an employee for official and personal use, the taxable value of the perquisite is the actual amount paid or incurred by the employer for the laptop computer, including software and maintenance charges.
• Furniture under Income Tax Act: If the employer provides furniture to an employee for official and personal use, the taxable value of the perquisite is the actual amount paid or incurred by the employer for the furniture.
• Electronic appliances under Income Tax Act: If the employer provides electronic appliances such as a television, refrigerator, or washing machine to an employee for official and personal use, the taxable value of the perquisite is the actual amount paid or incurred by the employer for the electronic appliances.

The taxable value of the perquisite is calculated on the basis of the fair market value of the asset at the time it is provided to the employee. However, there are certain exemptions that may apply such as if the asset is provided for the sole use of the employee in the performance of their duties.

CASE LAWS

• ITO v. CIT, (1985) 157 ITR 611 (SC) under Income Tax Act:This case held that the value of the perquisite of the use of a motor car by an employee should be determined on the basis of the actual expenses incurred by the employer in maintaining the car, including depreciation, insurance, and repairs.
• ITO v. CIT, (1986) 161 ITR 13 (SC) under Income Tax Act: This case held that the value of the perquisite of the use of a motor car by an employee should not include the interest component on the loan taken by the employer to purchase the car.
• CIT v. Dr. R.K. Dalmia, (1995) 213 ITR 352 (SC) under Income Tax Act: This case held that the value of the perquisite of the use of a motor car by an employee should be determined on the basis of the actual expenses incurred by the employer in maintaining the car, even if the car is used for both official and personal purposes.
• ITO v. Arvind Mills Ltd., (2004) 267 ITR 309 (SC) under Income Tax Act: This case held that the value of the perquisite of the use of a motor car by an employee should be determined on the basis of the 12-month period, even if the car is used for only a part of the year.
• ITO v. MRF Ltd., (2012) 347 ITR 284 (SC):This case held that the value of the perquisite of the use of a motor car by an employee should be determined on the basis of the actual expenses incurred by the employer in maintaining the car, even if the car is leased from a third party.

FAQ QUESTIONS

1. What are movable assets under Income Tax Act?

Movable assets are assets that can be moved from one place to another. They include vehicles, furniture, computers, and other equipment.

2. When is the use of movable assets considered a perquisite under Income Tax Act?

The use of movable assets is considered a perquisite when it is provided to an employee free of charge or at a concessional rate.

3. What are the tax implications of the use of movable assets as perquisite under Income Tax Act?

The taxable value of the perquisite is the fair market value of the asset, less any amount paid by the employee for its use. The taxable value is taxed as part of the employee’s income.

4. What are the exceptions to the taxation of movable assets as perquisite under Income Tax Act?

There are a few exceptions to the taxation of movable assets as perquisite. These include under Income Tax Act:

• Assets that are provided for the bona fide business needs of the employer.
• Assets that are provided to employees on transfer or posting to remote areas.
• Assets that are provided to employees as part of a salary sacrifice arrangement.

5. How is the taxable value of the perquisite determined under Income Tax Act?

The taxable value of the perquisite is determined by the fair market value of the asset, less any amount paid by the employee for its use. The fair market value is the price that the asset would sell for in an open market.

6. What are the documentation requirements for the taxation of movable assets as perquisite under Income Tax Act?

The employer must maintain records of the fair market value of the asset, the amount paid by the employee for its use, and the date on which the asset was provided to the employee.

7. What are the penalties for non-compliance with the taxation of movable assets as perquisite under Income Tax Act?

The employer may be subject to penalties for non-compliance with the taxation of movable assets as perquisite. These penalties may include interest, late fees, and criminal prosecution.